CRECI Property Risk Management Questions and Answers

Question 1

A property manager is negotiating a lease with a new retail tenant. To protect the landlord from liability claims arising from the tenant's operations or customer incidents within the leased space, which lease provision is most critical for risk transference?

Accepted Answer

A requirement for the tenant to carry adequate Commercial General Liability insurance and name the landlord as an additional insured.

Answer

Naming the landlord as an 'additional insured' on the tenant's Commercial General Liability (CGL) policy is a primary method of risk transference. [22] It allows the landlord to be covered under the tenant's policy for claims arising from the tenant's operations, effectively transferring the financial risk of such claims from the landlord to the tenant's insurance company.

Question 2

A property owner decides against purchasing earthquake insurance for a building in a region with very low seismic activity. Instead, the owner allocates funds to a contingency reserve to cover potential minor repairs. This strategy is an example of which risk management technique?

Accepted Answer

Risk Retention

Answer

Risk retention, also known as acceptance, is a strategy where a party decides to assume the financial responsibility for a particular risk. [24] In this case, by forgoing insurance and budgeting for potential damage, the owner is consciously retaining the risk of earthquake-related losses.

Question 3

Which of the following is the BEST example of a risk mitigation strategy for a commercial property's physical assets?

Accepted Answer

Implementing a comprehensive preventative maintenance program for the HVAC and roofing systems.

Answer

Risk mitigation (or reduction) involves taking active steps to decrease the likelihood or impact of a potential loss. [23, 11] A preventative maintenance program directly addresses the physical risks to a building's critical systems by identifying and fixing potential issues before they lead to major failures or damage.

Question 4

When reviewing a Certificate of Insurance (COI) from a contractor hired for a major renovation, a property manager must verify several key details. Which of the following is typically NOT found on or verified through the COI itself?

Accepted Answer

The contractor's insurance premium has been paid in full for the policy term.

Answer

A Certificate of Insurance (COI) is a document that provides evidence of coverage at a specific point in time. [18] It details policy limits, effective dates, and endorsements like 'Additional Insured' status. However, it does not provide information about the insured's premium payment status, and a policy can be cancelled for non-payment after a COI is issued. [20]

Question 5

In the context of property risk management, what is the primary purpose of an Emergency Action Plan (EAP)?

Accepted Answer

To outline procedures for employees and occupants to follow for life safety during an emergency. [1, 2, 8]

Answer

An Emergency Action Plan (EAP) is a written document designed to facilitate and organize actions during workplace emergencies. [1] Its primary purpose is to ensure life safety by providing clear procedures for evacuation, shelter-in-place protocols, and accounting for all personnel during an emergency. [4]

(CRECI) Commercial Real Estate Certification Institute Practice Test

(CRECI) Commercial Real Estate Certification Institute Practice Test

CRECI Property Risk Management Questions and Answers